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March 06, 2005

Santorum's Sweatshop Expansion Bill

Sweatshops Expanded, Overtime Attacked, and State Minimum Wage Laws Undermined

This is as low as it goes, as the GOP fights to expand sub-minimum wage sweatshops across the country. Pennsylvania's Rick Santorum is leading the charge for a GOP bill that would ostensibly raise the minimum wage by $1.10 per hour, but in reality would cut wages for millions of American workers and expand unregulated sweatshops across the country.

As this Economic Policy Institute analysis details, the bill is a trojan horse for assaulting workers rights.

Licensing Sweatshops: While a $1.10 per hour minimum wage increase by itself would help 1.8 million workers, Santorum includes a poison bill exempting any business with revenues of $1 million or less from regulation -- raising the exemption from the current $500,000 level.

The upshot: while 1.2 million workers could qualify for a minimum wage increase, another 6.8 million workers, who work in companies with revenues between $500,000 and $1,000,000 per year, would lose their current minimum wage protection.

And an even larger number of businesses, those with revenues under $7 million, would be exempt from fines under a range of other safety, health, pension and other labor laws. Essentially, the realm of unregulated sweatshops would be expanded and legalized under Santorum's bill.

Killing Overtime: It gets worse-- the 40-hour work week would be abolished and companies would not have to pay overtime if they cut hours the next week. The proposal is called "flex time", but workers would have no say in the matter. Their hours could be rearranged, upsetting child care and other weekly routines, and companies would no longer have the deterrent of having to pay overtime as a way to encourage giving workers a regular weekly schedule.

Banning State Minimum Wage Laws: But here's a kicker from a GOP supposedly dedicated to states rights. Santorum's bill would ban states from requiring employers to pay tipped workers with a guaranteed wage. Employers could pay tipped workers nothing and force them to live off tips, while states would be preempted from creating a higher wage standard for tipped workers.

The federal Fair Labor Standards Act specifically guarantees states the right to impose higher wage standards than the federal law. One area where many states have a higher standard than federal law is for tipped workers, who are guaranteed only $2.13 per hour in wages under federal law and can be forced to credit their tips against the required federal wage level. Many states have a higher minimum wage for tipped workers or have abolished the so-called "tip credit" altogether and let workers keep their tips, without allowing employers to reduce their salary below the regular minimum wage level.

With Santorum's bill as law, you would end up with a situation where small and even medium size restaurants and other businesses with tipped employees would be exempt from the federal minimum wage, and state governments would be barred from requiring employers to pay actual wages to tipped workers. Essentially, those workers could be hired for zero dollars and told they had to live only off tips, however little those were.

The attack on the tip credit is bad enough, but the precedent of the federal government creating a MAXIMUM standard for wage regulation and restricting the right of states to create a higher standard is even more dangerous. Because of federal inaction, states across the country have raised their minimum wages -- Red State Florida raised theirs just last fall and indexed it to inflation -- and many more are thinking about it. (See the chart below)

If Santorum and the GOP can push through a restriction on states' ability to raise standards for tipped workers, the next step could easily be a restriction on states being allowed to have ANY minimum wage higher than the federal level at all.

The City Minimum Wage Precedent: Sound too far-fetched even for rightwing politicians? Well, after a number of cities began enacting city minimum wage laws, about a dozen southern and western states, including Florida, Louisiana and Georgia, passed legislation banning local governments from enforcing local minimum wages higher than the federal minimum wage level. Backed by the conservative American Legislative Exchange Council, these "minimum wage repeal acts" are the model for the national GOP going further and preempting state minimum wage laws, just as they recently preempted state class action laws and just as they have preemped state health care and environmental regulation. (See this post today on the full range of conservative's preempting progressive state laws).

Taking the fight to the states: Right now, there is an upsurge of grassroots energy working to raise the minimum wage at the state level. Despite the Florida legislature banning local minimum wage laws, Florida voters last fall, by a vote of 72%, raised their overall minimum wage by $1 per hour -- and raised the wage for tipped workers by the same amount. Other states are raising the minimum wage far higher than the federal level-- Washington State now has a $7.35 per hour minimum wage, and San Francisco has a $8.62 per hour city minimum wage.

The GOP now knows that it's not enough to just keep blocking minimum wage increases at the federal level; they have to stomp on these new state initatives as well. The Santorum bill is the first step in the rightwing goal of not only restricting federal law but gutting the ability of states to take action against sweatshops as well.

Pounding Santorum and the GOP: If progressives miss the opportunity to smash this vote over the head of these rightwing politicians, they are truly brain-dead. While voters are closely divided on a range of social issues, even many normally Republican voters support raising the minimum wage. It's the best wedge issue in the progressive arsenal, and we get to skewer the GOP for hypocrisy on states rights to boot.

States raising minimum wage

Thanks to ACS Blog for the heads up.

Update: BTW- for those in who need a quick tutorial on minimum wage economics and arguments, see these posts:

  • Why Minimum Wage Beats EITC
  • Popularity of Raising Min Wage to $8/hr
  • How the Minimum Wage Increases Employment
  • Who Pays for the Minimum Wage?
  • Why Supposed Job Losses from Min Wage Don't Matter
  • Politics of the Minimum Wage

    Posted by Nathan at March 6, 2005 09:38 AM